Out of town and supermarkets set to be retail’s star players with potential for £10bn ‘flatpack bounceback’ in 2021

Retail warehouses and supermarkets are set to be the darlings of the retail sector this year as e-commerce, essential shopping and home improvements drove appetite during this year’s cycle of lockdowns.

According to Colliers’ recent UK Retail Market Update, it will be out of town retail that will drive the ‘flatpack bounceback’ as the Government aims to bring two million first time buyers into the housing market, generating around £10 billion of spending power*. Bulky goods retailers, home and DIY stores are all set to benefit from a new wave of buyers coming to the market. This will compound the already solid performance seen throughout lockdown as the population turned to home improvements.

David Fox, co-head of UK Retail Agency at Colliers International, commented: “This year we’ve seen the retail market become more polarised with COVID-19 creating a dynamic that none of us could have predicted. It would be easy to pin all of retail’s woes on this year, but it’s important to acknowledge there was already a seismic change in the way people shopped with the increasing penetration of online shopping and we have seen this accelerate with the arrival of COVID-19.

“The appetite for home improvement has benefitted firms such as Kingfisher and IKEA despite the logistical issues of operating in lockdown. The properties these firms occupy are often larger, out of town warehouses which naturally lend themselves to more socially distanced visits. However the growing trend for DIY is driving strategies from both for smaller city centre formats.”

September’s ONS release showed a fifth consecutive month of positive sales growth across all retail, with volumes increasing by 1.5 per cent month on month. Food stores have led the way in terms of sales growth in retail, however non-food stores are now making a significant recovery, with October, pre-second lockdown, seeing sales of 1.7 per cent above their pre-pandemic February levels. Retail investment has reached in the order of £3.2 billion to date this year across retail warehouses, supermarkets and shopping centres. Significantly, this has not been the dramatic drop that some may have expected in comparison to the £3.6 billion transacted during the same period last year.

Tom Edson, head of Retail Capital Markets at Colliers International, added: “Throughout this year we’ve seen investors seek defensive assets with supermarkets and retail warehouses at the top of their wish lists. A new breed of investor has entered the market, looking for the best performers across the retail sector, further polarising the market. Despite the relative stability of the retail capital markets it is still a soft market. We expect there to be a healthy pipeline of deals under offer this month, but it will by no means be the manic end of year we have come to expect.”